AMD Stock: Is This a Game Changer for Advanced Micro Devices, Inc.?

By Alessandro Bruno, BA, MA Published : June 25, 2016

New Chips Could Send AMD Stock Surging

Advanced Micro Devices, Inc. (NASDAQ:AMD) is one of the most interesting tech companies in 2016. Since the end of last February, AMD stock has been rising in anticipation of no less than a revolution in processors.

AMD has clearly found a way to regain market share for the first time in many years and shareholders have rewarded this confidence with a strong push for AMD stock. It will likely continue to move up as the new “RX 480” graphics card marks AMD’s next generation of graphic cards based on the “Polaris” architecture. (Source: “SAPPHIRE AMD Radeon RX 480 Graphics Card Tear Down Surfaces – PCB and Polaris 10 GPU Pictured Up Close,” WCCF Tech, June 22, 2016.) The new device will be one of the best bang-for-your-buck products of its kind.

At a price of $199.00 for the 4GB unit, the card uses a total of 2,304 stream processors. As an investor, you don’t need to understand exactly what the new chips do. But you can understand that a new processor that doesn’t stress the PC’s cooling system so that it can run with smaller fans allows for greater capabilities. PC manufacturers can reduce the size and weight of their devices thanks to such chips.

Manufacturers eagerly await AMD’s new cards, which have become far more competitive compared to products from such rivals as NVIDIA. From a business perspective, AMD will focus on the mid-price segment to ensure the highest value. Raja Koduri, who heads AMD’s Radeon brand, has focused on revitalization even in the face of intense competition. It may have been a gamble, but it seems that AMD has won—at least the first part of the challenge—and AMD stock is certainly sending a victorious signal. (Source: “Exclusive: How AMD’s ‘The Uprising’ Ad Campaign Will Incite A Radeon Rebellion,” Forbes, June 12, 2016.)

AMD has listened to its customers, working on the drivers that were the subject of regular complaints. In a matter of just nine months, AMD has greatly changed things. The new RX 480, despite its price point, can take on the formidably expensive NVIDIA cards—which cost some $700.00.

This is why AMD stock has so much potential now.

Again, you rightly wonder, “why is this relevant?” These graphics cards have the virtual reality (VR) capability that everybody wants now. Virtual reality is the next big wave in the technology sector.

AMD, through its new card, has simply lowered the price of admission to virtual reality technology. NVIDIA had enjoyed a virtual monopoly here, but many have grown concerned by the pricing, which NVIDIA has kept high, given the quality and demand. This was what many consumers were complaining about.

Now, AMD has come in with an easy-to-sell product, which will help spread virtual reality products by making them more affordable to the average consumer. It’s not by chance that AMD has called the campaign for the new Radeon RX 480 family an “uprising.”

Analysts have appreciated the company’s new product strategy so much that they have set a $6.00 target for AMD stock. That target might be too low, though, since it’s well within reach in the next few days. Indeed, just in the past five business days, AMD stock has increased more than 24%. In the past month, it has almost doubled. Year-to-date, the stock performance stands at 81%. AMD stock could blow through this target far faster than the Street is expecting. (Source: “Advanced Micro: Polaris, Zen Impress, Says Canaccord, Buy the Turnaround,” Barron’s, June 16, 2016.)